He was in boyish good spirits as about 150 contractors buzzed around his mansion and its acres of grounds, building a giant "Mega" sign on the front lawn and erecting a mobile stage that production company MadAnt says is New Zealand's largest. He mugged for the camera and joked, "it's another raid" as a helicopter flew overhead.

The world's most controversial Internet tycoon is preparing to launch his site at 6:48am on Sunday morning—a year to the minute after his New Zealand mansion was raided and his old service was shut down by the authorities. (Press, including Ars Technica, have received an early look at the site.)

Ars freelancer Chris Keall spoke with Dotcom on January 18 at his mansion outside Auckland, discussing topics ranging from Mega's business model to legal threats that may come back to bite his business.

"I would have the same fears"

In its heyday, Megaupload had around 50 million unique users—none of whom have regained access to their files since the site was taken offline. We put the most obvious question to Dotcom first: why should users trust him with their data at all? Wouldn't it be legitimate for users to be spooked by Mega and refuse to go near it?

“You are certainly right," Dotcom conceded. "If I [were] a user of Megaupload, I would probably have the same fears. There will be users who chose not to work with us because of that, and that is unfortunate."

But Dotcom hopes that enough users will value the service he's offering: all-encrypted storage that can't be opened by anyone—even the host. He knows there will be a lot of people coming to check things out in the weeks to come, and first impressions matter.

“There will also be a lot of users who just want to try this new service and see how good it is," he said. "Once they realize there is really no alternative to this service right now in terms of safety and privacy, I think there will be a lot of users who will use this. And over time, you know, when the service is live for a few months and people see these guys are still here, I think the trust will grow.”

The jovial pre-launch atmosphere was only broken when Dotcom and his lawyer Ira Rothken were reminded that this week US prosecutors have raised the possibility of fresh charges if the Mega launch goes ahead—an act that could be interpreted as violating a key bail condition Dotcom signed in by affidavit: not to relaunch Mega or a similar service.

Rothken angrily rejected the notion that Dotcom is violating bail conditions. "Mr. Dotcom is working in consultation with top-notch NZ defense counsel on bail compliance," he said. "[He] is innocent, is presumed innocent, and is entitled to innovate and work in technology like any other innocent New Zealander especially when the US takes away all his assets and delays the extradition proceedings."

Nothing in Dotcom's bail conditions or US law precludes his engaging in lawful business, including Internet and technology businesses, said Rothken.

Embracing even the "smallest, most unreliable" hosts

Enlarge/ Giant Mega sign being prepared for Sunday night's launch event at the Dotcom mansion in New Zealand.

Chris Keall

The Mega business plan will be a distributed model, with hundreds of companies large and small around the world hosting files. A hosting company can be huge or it can own just two or three servers, Dotcom said—just as long as it’s located outside the US.

“Each file will be kept with at least two different hosters, [in] at least two different locations," said Dotcom. "That’s a great added benefit for us because you can work with the smallest, most unreliable [hosting] companies. It doesn’t matter, because they can’t do anything with that data."

More than 1,000 hosts answered a request for expressions of interest on the Mega homepage. Dotcom said several hundred will be active partners within months. Successful hosts will get paid €500 per month per server; each server needs to supply 24 hard drives with 72 terabytes of storage and one gigabit of bandwidth, among other requirements.

That's all down the road, however. For now, Mega is launching with just one, professional, hosting operator—a subsidiary of Cogent, based in Dotcom's home country of Germany.

Dotcom said he needed a rock-solid setup for the launch and an operator who could rapidly scale if traffic and hosting requirements suddenly go through the roof after the January 20 launch (he had hoped to have a server rack operating in New Zealand for the launch as well but said capacity on the Telecom/Singtel/Verizon-owned Southern Cross Cable was prohibitive).

The Washington DC-based, Nasdaq-listed Cogent was one of the suppliers of infrastructure and hosting services to Megaupload before its 2012 takedown. According to the indictment, Megaupload was paying Cogent around $1 million a month to lease “approximately thirty-six computer servers in Washington, DC and France." It was a substantial contract, although one that was dwarfed by that of Virginia-based Carpathia Hosting, where the bulk of Megaupload files were hosted, and are still stranded.

Cogent's fate was closely enough tied to Megaupload that its shares dropped 23 percent in a day after last year's raid, from $19.20 to $15.43. By mid-March, however, the stock had rebounded strongly; it closed recently at $24.11.

Having Cogent back on board is a source of pride for Dotcom; a major public hosting company has made a vote of confidence in his business plan for Mega. He was about to go into further detail on Cogent’s hosting operation in Germany when his lawyer Ira Rothken—in Auckland for the launch and sitting in on the interview—stopped him, citing security concerns if the specific location was revealed.

Launching the most lawyered-up startup in tech history

The Mega business plan has been vetted by more than 20 lawyers across the US and New Zealand, Dotcom said—including those at Rothken's firm and New Zealand law firms Simpson Grierson (one of the largest corporate law firms in NZ) and Lowndes Jordan (an intellectual property specialist). Also on Team Mega are two independent lawyers capable of handling the most difficult work: Queen’s Counsel Paul Davison (often cited as the most expensive lawyer in New Zealand) and Guyon Foley—a criminal lawyer who made his mark prosecuting cases for the police before "switching sides," so to speak.

“This startup is probably the most scrutinized by lawyers in the history of tech startups,” Dotcom told Ars.

Dotcom said it’s inevitable that Hollywood and music labels will “heckle” Mega "going by their past aggression... they can't help themselves" (and there was certainly a foretaste of possible trouble to come this week as Mediaworks, which owns one of the two big radio networks in NZ, pulled ads for Mega from its stations; an insider said the move followed pressure from music and movie advertisers).

Rothken said anybody who comes after Mega has no case.

“You have companies like Dropbox and Google with Drive with materially similar technologies, and they are in business and they’re thriving—and Mega adds encryption,” he said.

But doesn’t encryption add a sinister edge? After all, encryption means Mega will be like the Swiss bank of online storage services; customers could easily use the technology to hide, say, pirated movies or child porn.

Rothken responded that many technologies have dual uses, but on balance provide more public good. That’s how the VCR stayed on the market despite facilitating video piracy. The same argument applies to cloud computing as a whole, he said.

For good measure, Rothken also noted that former Deputy Homeland Security Advisor Richard Falkenrath wrote about encryption as a desirable feature for cloud computing services ("You don’t really need to know where your data is. As long as you know it is safely wrapped in an at-rest encryption cocoon, you should feel secure," the advisor wrote.)

Dotcom added that although other services don't have a one-click encryption option built into their interface, the likes of Google Drive allow you to upload encrypted, password-protected files. Dotcom and Rothken’s arguments are well rehearsed and, on the face of things, have a solid logic.

But Dotcom said the apparent movie and music industry push against the Mega radio ads was an “emotional reaction” from the content industry. Those feelings remain. Even with the best precautions, attempts to shut down Mega—and shut up Dotcom—are unlikely to stop.

130 Reader Comments

A big part of that is due to the extreme nature of US Attorneys who overreach. Between Megaupload and the absurd foreign raid, the wildly overkill attack on Aaron Swartz and the result (and then their backpeddling), and then the "too big to fail" HSBC drug laundering bullshit. Helicopters and a big raid on a drug money laundering bank on US soil ... that makes a ton of sense and I could support it. Instead ... its the copied Brady Bunch video or whatever that they go after and then don't pursue the bank at all. It's entirely ass-backward.

Dotcom might be "too big to fail" himself, but he is pretty much sane about it when comparing his visible actions to the visible actions of US Attorneys. Hopefully it is a clear signal to the US Attorneys that these antics of theirs can backfire.

We owe Dotcom for the actions of our country, and a bit of support is a small price to pay. Plus, we may as well have one rich martyr as well as one dead one.

It sounds like Kim Dotcom's lawyers say he is just an "advisor" -- good luck proving that in court. Just because you don't have anything on paper that says you're the boss to MEGA...doesn't mean you aren't.

I welcome it. The overreach of US gov't needs to be addressed sooner or later.

Isn't Dropbox encrypted by default? How is Mega any better? You even have the guarantee that Dropbox is unlikely to get a surprise shutdown by the Feds.

The biggest issue to me (in addition to the arbitrary shutdown risk), is that Mega says things are encrypted but there's no way to show or prove to the public that it's actually the case. Dropbox and other companies that encrypt do suffer from this problem of "trust", but I don't use Dropbox because of the encryption.

Encrypted as in the transmission of the data yes... pointless though. Would be like handing cash to the thief, hand by hand through a pvc pipe. What encryption really is is local, software encryption that stays and decrypts locally in your computer without leaving outside the network, then those files are stored in servers in a way that not even the provider can access. In this case read up on Wuala (ref link, thanks) or SpiderOak. Best encryption class for the users, and not some stupid claim over "private", "ssl" or other generic wording they use to fool one.

afaik, Dropbox uses its own servers. Mega will be distributed. Anyone can signup to become a storage node.

Except if you're in the US.

Even though Dotcom's back to dealing with Cogent, a US company, as long as no data from his company resides on any US servers (hence the German servers Cogent set up for the Mega launch), he and his lawyers must feel pretty confident.

Okay, there's a lot of head in the clouds about this. There's a lot of hypothetical hoity toity talk about it.

The reality is the United States is quickly becoming a country that works on intellectual property. We're ditching production and embracing R&D. It is really important that we stand up for our current IP industry, even if they are spoiled brats, because the up and coming IP industry isn't. It involves engineers and high brained people, the likes of which work on $100,000/license ballistics simulation software.

Dotcom has no purpose for providing this encryption other than avoiding any legal liability as well as any social accountability. We can jump into abstractions to try to justify what he's doing in some sense, but it doesn't change that the premise of this business is being unable to moderate user uploaded content in any way what-so-ever.

The extreme likelihood is that a bill will be introduced into the U.S. congress and passed that requires service operators who operate a service to put in place reasonable (as in expense) measures to be able to moderate their users' activities. If the law's written by someone who's inept, it'll mean mandatory backdoors into secure communications.

All this dude's doing for us is providing the justification U.S. lawmakers need to erode our civil rights further.

So... We should stifle ourselves beforehand in order to stop legislation that stifles us. That's some great logic you got there. Maybe we should also self-stifle political expression before lawmakers enact laws stifling political speech.

Also, do you and your ilk, the AAs, realize how much genuine dislike, distaste and even outright hatred (see some above comments) you've created towards yourselves through all of these overblown "antipiracy" actions, right from the first lawsuits against individual filesharers to trying to extradite people running legal linking sites to the terrorist- like raid on Dotcom.

You're making yourselves into hated pariahs. Dumbasses.

Oh, and I never would've even heard of Dotcom if it wasn't for the ridiculous takedown.

So... We should stifle ourselves beforehand in order to stop legislation that stifles us. That's some great logic you got there. Maybe we should also self-stifle political expression before lawmakers enact laws stifling political speech.

You realise this is what the movie industry has been doing for the last 60-70 years? Create your own form of censorship before the government decides to censor you. It's one of the reasons Joe McCarthy managed to cause so much pain and anguish - people were black-listed on suspicion of being "un-American". It should never be allowed to happen again.

Thank you. I have seen plenty of your posts, but had until now just thought yours was another random user name. I will spend some time browsing through your site, but from first impressions... I may not entirely agree with the approach, but I certainly share a lot of the sentiments.

Much as I take dotcom's antics with a pinch of salt, I do admire the sheer "Fuck You" attitude he has. I hope it pans out for him.

In other news, for the first time since registering on this site over a decade ago, I've used the ignore function. Titanium Dragon is, I'm fairly sure, an **aa shill. If not, he's deluded. Either way, I'm sick of his whining, and I have a healthy interest in my copyrighted works not being pinched, and therefore give pro-copyright people a little more leeway than I would otherwise.

I'm actually thinking of using the ignore function too. For the FIRST TIME. He's become too obvious and ridiculous.

Hadn't thought about it, but yes, it does help quite a bit.

Until people quote him - I still see his industry lobbying efforts showing up in quotes (he's been on my ignore list for a couple of months now, as an obvious industry plant being obvious).

If there really IS a bail condition that stipulates this guy must not set up a new "Mega" or a similar company, then he´s toast, no matter what his 10,000-bucks-a-day-lawyer is telling him.How could starting this new "Mega" thingie`***NOT*** violate such a bail condition ..... ???!!????

Then again, it is very obvious that the guy has made a sh!tload of money off the "Yay we are internet rebels and if we don´t get the content the way we like it we´re simply going to take it anyway!!11111!!!" mindset that is so prominent here on AT.

Next time the police is coming after him, he probably has a better escape plan up his sleeve than "lock myself in my panic room and hope I´m invisible in here".

Let's start by saying that I'm not a fan of the RIAA. I find the whole business model of the old music industry totally outdated and not in sync with our era. The same goes with the movie industry. Everybody knows that these agencies do not have the artists best interest in mind and that they are a remnants of an old paradigm in the entertainment economy.

Now, with that out of the way, let's discuss Kim Dotcom and his new 'Mega' service. First of all, I don't like the guy. He built his fame on scams at the time he was still known as Kim Schmitz. He was convicted for insider trading and embezzlement. He is also an egocentric mythomaniac. I remember that around 2003, he was posting photos of his "lavish" lifestyle on his blog but everything turned out to be fake; the private jets were rented (and not even flown), the models hanging out with him were paid for photo ops, the big cars were not his, etc. He reached an all time high in ridicule when he went about creating a hacker group to track down Bin Laden (or when he announced publicly he would commit suicide).

That guy, with Megaupload, found a way to turn a profit with other people's work. Although I do not support the way Megaupload was closed, let's be honest for half a second and admit that the service was not mainly used as a way to share private files but rather a convenient way to give access to pirated music, movies and software.

Today, he does it all over again. Hiding behind fancy words like "free internet", he is again ready to make money out of piracy.

So my question is this: why is the press (and especially Ars) giving him so much free publicity and coverage while there are some really good startups out there releasing beautiful, useful products and services we never hear about?

And a side question: why are people highlighting that fact so downvoted?

Regarding the shill thing, I do think such things exist, but I also we've got a much bigger concern. Believers. Those that believe that they are not only correct, but that any deviation from that cause is immoral and unjust. These are the kinds of people that advocate for eternal copyright, although they may ask for eternity minus one day. When issues other than copyright length arise, they might make a concession on terms to paint themselves as reasonable, but they fail to realize that addressing the fact that for many people alive today, the public domain has not only stopped growing, but actually shrank in their lifetime. It's unreasonable to expect anyone to respect copyright under such terms, and to not see that even a little bit of giving can go a long way in regards to fostering a culture of mutual respect shows how their almost religious devotion to an ideal blinds them. Another common tactic is to declare themselves opposed to large corporations but claim to be acting on behalf of the indies while advocating for maintaining the status quo or something remotely close to it.

Now, shills may use some or all of those techniques, but while they are technically classified as 'platform evangelists' in their job title, it's the true believers that are the concern. The shills will go elsewhere when the pay is better or when they've put in their hours.

SNico wrote:

Let's start by saying that I'm not a fan of the RIAA. I find the whole business model of the old music industry totally outdated and not in sync with our era. The same goes with the movie industry. Everybody knows that these agencies do not have the artists best interest in mind and that they are a remnants of an old paradigm in the entertainment economy.

Now, with that out of the way, let's discuss Kim Dotcom and his new 'Mega' service. First of all, I don't like the guy. He built his fame on scams at the time he was still known as Kim Schmitz. He was convicted for insider trading and embezzlement. He is also an egocentric mythomaniac. I remember that around 2003, he was posting photos of his "lavish" lifestyle on his blog but everything turned out to be fake; the private jets were rented (and not even flown), the models hanging out with him were paid for photo ops, the big cars were not his, etc. He reached an all time high in ridicule when he went about creating a hacker group to track down Bin Laden (or when he announced publicly he would commit suicide).

Those kinds of things are generally the case with those that make a grand public showing of their wealth. If you see a music video with nice cars, beautiful women, a big mansion, etc., and the artist has not had a decade or more of coninued success, it's a

That guy, with Megaupload, found a way to turn a profit with other people's work. Although I do not support the way Megaupload was closed, let's be honest for half a second and admit that the service was not mainly used as a way to share private files but rather a convenient way to give access to pirated music, movies and software.

Today, he does it all over again. Hiding behind fancy words like "free internet", he is again ready to make money out of piracy.

So my question is this: why is the press (and especially Ars) giving him so much free publicity and coverage while there are some really good startups out there releasing beautiful, useful products and services we never hear about? [/quote]Because it doesn't matter. Even if his intentions are bad, the results will be good for us. MU and Mega will likely be widely used to facilitate copyright infringement, but they will also advance internet freedom at the same time.

Quote:

And a side question: why are people highlighting that fact so downvoted?

These comments are also often of an inflammatory nature and contain numerous logical fallacies from posters with long histories of such behavior.

Dropbox is not encrypted in that way, they can open and look at your files any time they please as they had to admit to people. Yes you can upload encrypted files or containers to them but have you tried to do that seamlessly across multiple devices? It doesn't work.

You're sort of correct. I use encrypted sparse images over several OS X machines - that works fine. Can't read them from my iPhone / iPad, nor from a Windows box. So from multiple devices, fine. Multiple operating systems - no.

Come on Apple, open up sparse images to iOS. And while you're at it, let us at the file system without jailbreaking.

Gotta say I'm definitely not a fan of the voting system here. Most other websites it's fine but the % of tards here is just mind-boggling. Waaah I don't like copyright laws, downvote. Waaah this opinion ruffles my panties, downvote.

Like it or not, to some commenters here, he does have balls, really. As for the movie and music industry, I completely understand if they are upset that people steal their content. And lets be honest. To anyone here saying that Megaupload and this site will make tmoney by people hosting legal files is as a clown as well. Who has 100 GB of legal files, like the pictures you took, videos or word documents? Yes, some do, but most people use these sites for storing games, software, films, etc.

You are either naive or young.

My wife, alone, has around 65GB of photos, almost no duplicates. We have around 45GB of family video files - kids, trips, etc.

I have 4GB mailbox too (I like preserving old mails). And so on, and so on.

I haven't had any stupid 'pirated files' on my Mega account, because you have to be really stupid to store movies or anything like that on a remote file hosting service. That's what I have my NAS for.

Why are you assuming that everyone else is doing the same as you?

Why do you even assume I ever had or used such type of services? I never in my life used megaupload, never had an account and never downloaded anything and I also don´t have an account in his new Mega services, and its not because I don´t like the services because I don´t need them.

My companies own several terabytes of unique data so you don´t even have a clue what data I have. I own my backup servers and are custom build, so this is the reason why I don´t need this services. And part of me because I would never trust business data to a third party.

I never said people do not own valid and original data, of course they do, now that even phones are filming in full HD you can have several gigs in just a couple of minutes and pictures, videos, etc, are huge but that is not even related with what you said. If you think people upload their baby pictures and weeding videos files to a services like this I think the one that is being naive is probably you.

People with data usually have their own external hard drive, or home NAS or just keep them in their local systems. Must people never think of backups in the first place. You assume everyone does backups of their data and this is not true. Most people don´t even have a clue their hard drive will eventually fail and so they never do backups. And the ones that do don´t upload several hundreds of personal data to the net.

Maybe with Mega they will since it uses encryption but with Megaupload the biggest reason for using the service was for sharing data, otherwise why exactly do you think it was so popular since we have online unlimited backups for free for years now and thinks like cloud storage are also nothing new. Still his websites was huge and popular in storing "huge files" than any other provider, because its main focus was online sharing. Now if you want to share your wife's pictures and kids videos go ahead.

Now think again about how ridiculous your argument really was, because people uploading their own personal and private data to a sharing services was the minority. People uploading others people data to a public sharing services was the common factor, a simple Google back-link search to the site would have revealed that for you, it was one of the most linked websites in the world, and for files !!!. Now Mega of course is completely different and since it has encryption and is distributed in several places, this will create interest for people that actually want to host their own data which they don´t want to share either.

I hate this guy and i don't know why people support him! He makes a lot of money using other people's work! Keep alive torrents, spread art, music and other cool stuff FOR FREE, for the people, don't let a fat rich guy become richer with his stupid project of "FREEDOM". All bullshit.

Like it or not, to some commenters here, he does have balls, really. As for the movie and music industry, I completely understand if they are upset that people steal their content. And lets be honest. To anyone here saying that Megaupload and this site will make tmoney by people hosting legal files is as a clown as well. Who has 100 GB of legal files, like the pictures you took, videos or word documents? Yes, some do, but most people use these sites for storing games, software, films, etc.

An interesting dilemma is exactly what percentage of customers must be hosting illegal files before the service should be shut down for legal purposes. Some people say 100%. Others would say it doesn't matter. Others will pick a percentage in between... Which could be classified as "most".

And this isn't just limited to file hosting. A similar dilemma exists with guns, cars, alcohol, lock picks, etc.

Personally, I need an online backup of over 100GB. I shoot helmet cam footage while biking and this consumes a lot of storage. Even when uploaded to YouTube, Vimeo or Facebook, I don't consider those to be backups. Example: http://m.youtube.com/watch?v=uRyqq5s7g20

Dotcom says it’s inevitable Hollywood and music labels will “heckle” Mega "going by their past aggression ... they can't help themselves"

Of course they can't. They can't see the forest for the trees. Theirs is a dying business model and they fear any change that takes control away from them. Hence the raid.

Dying business model or not, they have a right to be upset that people are so casually stealing their content on a regular basis. Not that it justifies the way they act over it, just saying that there's lots of bad behavior on all sides here. Basically, the big content companies are kind of like Walter in The Big Lebowski... they're not wrong, they're just assholes.

Well, assholes is probably the nice word. They rely on nutty statutory awards, money floods to politicians, apparently a direct line to the FBI chief, and worldwide influence on sister organisations - all resulting in a mix of inflated legitimate or obviously illegal actions. Nearly all of which give rise to bad publicity which is enough to help pirates justify their wholly selfish unjustified criminal actions (piracy, irrespective of what people believe, is illegal for good reason!).

They really need to get a grip. Their old business model is limping away into the distance. The new business model is driven almost entirely by Apple (which can't last with Apple sneaking away a 30% margin for doing nothing but distributing tiny files which keeps prices articifially high - albeit a nice discount from what I remember as being CD pricing).

Why the record companies neglected setting up a joint venture to sell their music online across the planet is beyond me. They missed a golden opportunity to cut out the middle man. The book industry made the same error in ceding control to Apple/Amazon.

I understand the need to maintain his income and the balls to launch Mega like this complete with google maps prank and raid anniversary, its a sure way to gain supporters among common geeky netizens however I suspect it is going to be a flop. My gut feeling is by now most people got used to dropbox / Google drive / SkyDrive for legal files and crappy slow megaupload wannabes or bittorrent for illegal stuff. And let's face it: The legal vs illegal ratio is undeniably high, I never knew anyone paying up to have "access" and "faster downloads" to legal files that couldn't be had by other means. They all wanted access to warez and movies.

Pretty this will mostly replace Megaupload as a "fast" download service for TV shows and new movies/games. Someone uploads, posts their link and key, and away the internet goes.

(I'm not stating this as a bad thing, none of the current services like Rapidshare even compete with what Megaupload was in its hay day, so we need something like that to come back and start kicking butt.)

Confused... everyone thinks MU shouldn't have been shut down... but at the same time admit it was a pirates haven... They think this new service will be "totally legal" but also think it will quickly replace MU as the new pirates haven, but will be harder to detect.... so why exactly should the authorities not shut this down? and how exactly is it like Dropbox, Box, Skydrive, and Google Drive?

Confused... everyone thinks MU shouldn't have been shut down... but at the same time admit it was a pirates haven... They think this new service will be "totally legal" but also think it will quickly replace MU as the new pirates haven, but will be harder to detect.... so why exactly should the authorities not shut this down? and how exactly is it like Dropbox, Box, Skydrive, and Google Drive?

For along the same reasons, that drugs should be legalized. Because you can't stop "evil" human nature. Its yin and yang. You MUST take the bad with the good. But since bad is well...bad. People feel the need to overly fight against it. And just as MU harbored pirated files, it also housed legal files. Someone earlier mentioned the USPS and FedEx/UPS. MU was no different than those systems. One just used physical goods, the other used digital goods. The only difference is how digital goods can be duplicated, created, and accessed from virtual anywhere at anytime in the world. The rate of piracy did not suddenly increase because of MU. The average number of piracy 'sightings' simply increased because it came from a more popular and easily accessible website. Shutting down MU just simply moved the location of where all the pirates/pirated material was being stored. For instance I like to watch currently airing anime, and for some unknown reason lots of people liked to use MU, and other similar hosts for downloading them. When MU disappeared, the number of torrent peers instantly shot up. It just moved the access points, had nothing to do with piracy rates.